Chinese Banks in Talks to Take Part in Gold Fix Replacement

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Chinese banks are among those in talks to take part in the replacement for the century-old gold fixing benchmark.

There’s a “more diverse pool” of participants, including from China, interested in being part of the LBMA Gold Price, Ruth Crowell, chief executive of the London Bullion Market Association, said in a statement Monday. The LBMA declined to comment on the number and names of those in talks for the new mechanism that will start in March.

No Chinese companies have ever directly participated in the 95-year old price-setting ritual that takes place twice daily by phone between four banks. ICE Benchmark Administration was chosen in November to run the replacement, after silver, platinum and palladium ditched daily fixings last year. Chinese gold demand has more than doubled since 2009.

“We are encouraged by the number of firms who have shown interest in being participants in the new, electronic auction,” Finbarr Hutcheson, president of IBA, said in the statement. “Expanding the number of participants in the auction will increase the transparency and robustness of the data” and better represent the market price, he said.

Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays Plc currently conduct the fixings used by miners to central banks to trade and value metal.

China’s Market

China overtook India as the largest bullion buyer in 2013. The London-based World Gold Council said in August that demand will expand by at least 20 percent by the end of 2017 amid rising wealth. About two-thirds of gold jewelry, bars and coins were purchased in Asia in 2013, according to the council.

Trading volume on the Shanghai Gold Exchange climbed to a record last year. The bourse started bullion trading in the city’s free-trade zone in September and exchanges have added more Asian gold contracts, including a physically-delivered kilogram bar contract that started in Hong Kong last month.

The new London benchmark will be regulated by the U.K.’s Financial Conduct Authority from April 1 and will be brought in line with International Organization of Securities Commissions principles, according to the statement.

Gold for immediate delivery in London gained 7.6 percent to $1,273.85 an ounce since the end of December, after slumping 29 percent in the previous two years.